Illinois county, tax purchasers could have illegally rigged penalty rates at auctions

An Illinois county, its officials, and real estate investment groups could have violated federal and Illinois antitrust law by allegedly participating in a conspiracy to rig tax sales so that hundreds of properties were sold at the statutory maximum penalty percentage rate, the federal district court in Benton, Illinois, has ruled. The plaintiffs—individuals who owned property in the county and allegedly paid a "penalty rate" to redeem that property at county tax auctions—adequately pleaded each of the elements of unlawful conspiracy and monopolization claims, and the suit was not time-barred. Therefore, the defendants’ combined motion to dismiss the claims was denied (Bloyer v. St. Clair County Illinois , November 17, 2016, Yandle, S.).

The plaintiffs alleged that the defendants conspired to diminish competitive bidding in order to ensure the sale of properties at maximum penalty percentage of 18 percent beginning at least as early as November 2006 and continuing to the present. Despite this lengthy timespan, the claims were not barred by the statute of limitations, the court said. The plaintiffs sufficiently alleged that the limitations period for the claims was tolled under the discovery rule until 2014, when they discovered the injury. The complaint alleged several steps taken by the defendants to cover up the conspiracy, including strategic seating of key players at auctions, misdirecting of payoffs to political parties, and allowing of legitimate bids on less lucrative properties. Moreover, the plaintiffs claimed that the conspiracy to rig tax auctions was inherently self-concealing, the court noted.

Antitrust conspiracy claims. Noting that proof of an explicit agreement was not required to plead a Sherman Act antitrust conspiracy claim, the court found that the plaintiffs alleged sufficient facts suggesting that an agreement was made. The allegations in the complaint included specific details about the agreement and how sales were structured to eliminate competition.

While the plaintiffs did not provide a precise definition of the alleged relevant market, they did offer an overview of the Illinois tax sale procedure and outline of situations in which a successful purchaser of property at a tax sale may double his initial investment or gain title at less than market value. Along with citations to the Illinois Property Tax Code and Illinois case law concerning the public sale process, these allegations enabled sufficient identification of the relevant market. The plaintiffs reasonably set forth tax lien certificates as products that fell within the definition of commodity, and they adequately defined the relevant market in terms of both its product and location.

The complaining property owners also satisfied the requirement that they allege an injury not only to themselves but to the market in general. The complaint asserted an inflated penalty rate caused by the defendants’ anticompetitive activity, which "hundreds of other property owners would have been forced to pay in order to redeem their properties," the court explained. This was enough to establish injury, for purposes of the Sherman Act and Illinois Antitrust Act.

Monopolization claims. The plaintiffs also pleaded the requisite monopoly power and exclusionary conduct for a monopolization claim under Section 2 of the Sherman Act and Illinois Antitrust Act, in the court’s view. Specifically, their complaint included allegations of assigned seating arrangements to place tax-buyer defendants in the front and purposeful ignoring of non-defendant bidders, as well as the contention that winning bids were not a result of superior business acumen but rather were a result of an illegal agreement to eliminate competition in bidding for tax liens. This conduct was exclusionary, the court said, in that it had to effect of preventing other competitors from receiving the winning bid by "fixing, controlling, maintaining, limiting, and/or discontinuing the bidding of lower rates during the auction process." Thus, the monopolization claims were sufficiently stated to survive dismissal, the court concluded.

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